US Home Sales Rise Modestly in September Amid High Rates

Sales of previously occupied U.S. homes increased by 1.5% in September from August to a seasonally adjusted annual rate of 3.99 million units, according to data released Tuesday by the National Association of Realtors (NAR). Despite the monthly uptick, sales were down 2.2% compared to September of the previous year.

The September sales pace narrowly surpassed the 3.98 million units that economists had predicted. However, home sales have largely remained below the historic norm of around 5.2 million units annually, hovering near a 4-million pace since the start of 2023. This marks the second consecutive month where the annual sales pace has fallen short of 4 million.

Rising home prices persist nationally. The median sales price for existing homes in September climbed 1.3% year-over-year to $417,500, setting an all-time high for the month of September. Home prices have seen a continuous annual increase for 39 months.

Lawrence Yun, NAR's chief economist, described the market as "very tough," particularly with the ongoing rise in mortgage rates. The U.S. housing market has experienced a slump since 2022, when mortgage rates began to climb from their pandemic-era lows. Last year, sales of existing homes were essentially flat, marking a 30-year low.

This year's sluggish sales are largely attributed to increasing borrowing costs. Mortgage rates have trended upward since late February, influenced by expectations of higher inflation due to surging oil prices and geopolitical tensions, which have driven up long-term bond yields used by lenders to price home loans. Last week, the average rate for a 30-year mortgage reached 7.4%, its highest level in nearly three years, a significant increase from below 6% before late February.

Many homes sold in September likely went under contract in August and July, when the average 30-year mortgage rate ranged between 6.43% and 6.69%. Yun indicated that mortgage rates are unlikely to decrease substantially in the near future due to persistent uncertainty surrounding oil prices, geopolitical instability, and U.S. government debt. He advised homebuyers to consider rates around or slightly above 7% as a potential "new normal."

The surge in mortgage rates, which adds hundreds of dollars to monthly payments, has prompted many potential buyers to postpone their home-searching plans. However, those with the financial capacity to purchase at current rates or with all-cash offers now have a broader selection of homes than in recent years, as properties tend to remain on the market longer.

While overall home inventory remains below historical averages, the number of unsold homes at the end of September reached 1.6 million, the highest figure since November 2019. This inventory rose 1.9% from August and 4.6% from September of the previous year. At the current sales pace, September's inventory represents a 4.8-month supply, which falls within the traditionally balanced market range of 4 to 6 months.

This shift towards a more balanced market could provide buyers with greater negotiating power. In September, the national median home listing price saw a slight decrease of 1.2% year-over-year to $419,250. Approximately 21% of listings had their prices reduced. "The market is clearly tilting in favor of buyers able to negotiate for better prices," Yun stated.